Apple Stock Gets an Upgrade on Potential for AR/VR Headsets

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Apple

received some new love from Wall Street as analysts continue to ratchet up their expectations for the stock to factor in the potential for the company’s so-far unannounced entry into the market for augmented- and virtual-reality hardware.

As noted in the most recent Barron’s Tech Trader column, analysts have begun revising their target prices and earnings models for Apple (ticker: AAPL) shares to reflect the anticipated debut of the company’s AR/VR headset, or glasses, or whatever the product turns out to be, about a year from now. On Monday, J.P. Morgan analyst Samik Chatterjee raised his target for the stock price to $210, from $180. That compares with the share price of a bit more than $174 Tuesday morning.

Chatterjee declared Apple stock his top pick for 2022, joining Wedbush analyst Dan Ives, who recently said the same. Evercore ISI analyst Amit Daryanani on Tuesday said the shares are among his favorite choices for 2022.

BofA Global Research analyst Wamsi Mohan raised his rating on Apple shares to Buy from Neutral, while boosting his target on the stock to $210, from $160. He cited the expected arrival of an AR/VR headset in making the call.

“We view this technology as a game-changer as it will enable many new applications which will require high performance hardware and higher access speeds,” he wrote in a Tuesday research note.

While some analysts worry that AR/VR glasses could eventually replace the iPhone as a primary connectivity device, Mohan said that he thinks iPhone sales in fiscal 2023 sales will be better than some expect. Augmented reality could become “the killer app” for 5G devices, while the AR/VR category offers new opportunities for Apple’s services business, he said.

Mohan thinks Apple will continue to aggressively return capital to holders, and also noted that many institutional investors remain underweight Apple relative to the

S&P 500.
They could boost their positions ahead of the AR/VR launch next year, he said. 

Daryanani, the Evercore ISI analyst who named Apple as a top pick for 2022, repeated his Outperform rating and boosted his target price on the stock to $200, from $180. In a research note, Daryanani said he thinks Apple can sustain growth in earnings per share in the mid teens, “driven by a host of secular levers,” in particular growth in both wearables and services. He said Apple’s services arm can reach $100 billion in revenue by fiscal 2025, and that he sees a path for wearables to become a $75 billion business.

Daryanani’s other top picks for next year include the connector company

Amphenol

(APH), networking companies

Arista Networks

(ANET),

Cisco

Systems (CSCO) and

Ciena

(CIEN), and the IT services provider

CDW

(CDW).

After a recent surge of nearly 20% that took the company’s market capitalization close to $3 trillion—a milestone no other public company has ever reached— Apple shares have succumbed to some modest profit taking. Tuesday morning, the stock was down 0.7%, on a day when the

Nasdaq Composite
was off 1.2%. At $174.38, the stock is less than a 5% rally away from the $3 trillion mark.

Write to Eric J. Savitz at eric.savitz@barrons.com